There are pros and cons of blockchain digitalization of dollars. We already learned from Bloomberg and from Michael Snyder about a secret meeting of bankers with the startup Chain.com. The digitalization of money for purposes of transfers is the goal of the technology and of the meeting which was not so secret that no one could find out about it.

So, let me get right to the point. Currency is fungible. That means a dollar is a dollar, whether it is in one place or another, whether it is digitalized or a physical dollar. Blockchain is a method of transferring dollars.

Dollars can be identified by an asset ID as the Chain's website shows us. In fact, this is what can happen to currency with asset ID affixed to it:

Once issued, units of an Asset ID can be programmatically transacted with smart contracts or retired from circulation. 

So, the question is, is this blockchain technology good or bad? How far can this technology go?  Banks retire dollars everyday, as they wear out. Can they be retired without recourse or physical replacement, forcing the elimination of cash? So far there are bank regulations requiring access to cash. It would be a good thing to trace digital dollars so they won't be stolen from you. But privacy issues remain.

There are many questions about this blockchain technology. It has some important benefits. For example, it could be used to disperse helicopter money. As we approach the zero lower bound, that could be a good thing.

But before looking at the potential dangers and cons resulting from the misuse of blockchain  technology, here are some reasons it could be a good thing:

Responsibly Expand the Monetary Base Before It Is Too Late 

Eric Lonergan Precisely Defines Helicopter Money

Preserve Capital-The Relentless Slide Toward Deflation and Negative Nominal Rates

But questions remain about the technology, simply because Larry [retire-the-100-dollar-bill] Summers has been talking about blockchain being more important than the bitcoin created from it. Summers recently said in an article at CNBC that blockchain is more important than the Bitcoin it produces. He has attacked the existence of even medium sized bills, 100's and 50's, in not such an honest way in the past. That alone raises a red flag. It may turn out that the technology will be a good thing, but with thinkers like Summers touting it, could it be used to help eliminate cash? Once you eliminate big bills, you shrink the physical money supply by leaps and bounds.

Summers is rightly concerned about financial inequality, but seems not concerned enough about the demolition of cash.

After all, the physical money supply is already very small, a little over 1 trillion dollars. Hoarding that money could create shortages. If people won't trust that cash is available, what will their reaction be? Could they just rely on plastic, or would they attempt to rein in spending, destroying the whole purpose of cashlessness, that is, to stimulate the economy through negative rates.

So, to repeat, Summers has called for the elimination of 100 dollar bills, and the implication must be for the elimination of all cash, eventually. That is why, although the digitalization is not bad in and of itself, we have to follow this story as it unfolds. Digitalization could eliminate the need for cash from a banker's point of view!

Besides the Chain startup, there are other companies that are gearing up for global settlements, like Ripple. Bitcoin is scarce, so it would be of little value in expansion of the money supply. And sometimes the money supply must be expanded. So it makes sense that the technology is more important than the bitcoin it produces.

And it is significant that Bloomberg entitled the meeting of bankers and the Chain startup as Inside the Secret Meeting Where Wall Street Tested Digital Cash.

Why did the meeting need to be secret? Michael Snyder thinks that bankers want all of us to be their forced customers. That would happen if ATM machines are scarce, where people are unable to access their dollars in the form of physical dollars.

If we have the choice only of spending our bank account money or keeping it in the bank, Snyder says that is nothing more than a way for banks to make money off of every transaction, as well as being the road to destruction of privacy that cash affords. This very thing is happening in Sweden.

Once you limit cash transactions, as is being done in many nations, cash becomes so small a commodity that it is no longer in widespread use. That hastens its obsolescence. Your freedom will become obsolete at that point. People fear socialism. But the real socialism to fear is international banking socialism, that puts governments and the people under the thumb of the banking system.

GDP could be hurt by this move against cash, even though bankers believe that forced bank accounts would allow negative interest rates to stimulate the economy. Fear of cashlessness could overcome any minor benefits of negative rate stimulus. That is why helicopter money is a good idea, as it eliminates deflation without using negative rates as stimulus.

But if digitalization proves to be an attack on cash, helicopter money would have to be dispersed some other way. I am sure that could be done.

So, at this point, digitalization could be useful, but it has clear dangers, and governments must make the decisions regarding regulation of the technology, and it cannot be left up to the central banks alone.